SECTION 1: APPLICANT INFORMATION
[Provide personal or organizational details, including applicant name, contact information, and any associated organization. This information ensures proper identification and communication throughout the grant process]
Applicant Name: Apoorv Anand
Project Name: Stella
Stella is a leveraged yield farming protocol on Arbitrum with 0% cost to borrow. Stella enables leveraged strategies on top of capital efficient yield sources like Uniswap DEXs, TraderJoe liquidity book, and the Pendle PT pools, with integrations with Camelot V3 and Penpie coming soon.
The innovation about Stella is that it offers 0% cost to borrow, and leveragoors only pay a portion of their profitable positions upon closing. If the position is not profitable, the leveragoors do not have to pay any borrowing cost. The model is beneficial for lenders as well since their incentives are aligned with the leveragoor, and their upside is uncapped in market scenarios where leveragoors have more profitable positions.
Team Members and Qualifications:
- Tascha : Founder, Project Lead
- Nipun : Founder, Tech and Research Lead
- Arin : Product Lead
- Blum : Growth Lead
- Apoorv : BD and growth team
Project Links: [Enter Any Relevant Project Links (website, demo, github, twitter, etc.]
- Website : https://stellaxyz.io/
- Demo : https://www.youtube.com/watch?v=8F3rr3FsbK4&ab_channel=TraderJoeXYZ
- Github : Stella · GitHub
- Twitter : https://twitter.com/stellaxyz_
- Discord : https://discord.stellaxyz.io/
- TG: @apoorv99
- Twitter: https://twitter.com/stellaxyz_
- Email: [email@example.com]
Do You Acknowledge That Your Team Will Be Subject to a KYC Requirement?: Yes
SECTION 2: GRANT INFORMATION
[Detail the requested grant size, provide an overview of the budget breakdown, specify the funding and contract addresses, and describe any matching funds if relevant.]
Requested Grant Size: 186k ARB
Grant Matching: NA
Grant Breakdown: [Please provide a high-level overview of the budget breakdown and planned use of funds]
Stella has two parts to it: Stella Strategies (the leveraged strategies part) and Stella Lend (the lending pools on Stella). The 186k ARB of incentives will be distributed between the two parts as follows:
~66K ARB as incentives deployed on Stella Strategies
- Stella will provide additional 20% yields for leveragoors on top of their profitable positions.
- The additional incentive will only be provided on profitable positions, not on unprofitable positions. This will help protect from sybil attacks and incentivize good behavior.
- Stella currently runs a similar ‘leveragoor incentive’ program by providing 20% additional yields on profitable leveragoor positions.
- Extrapolating numbers from Stella’s previous ‘leveragoor incentive’ program to the Arbitrum STIP program, we expect to achieve a target TVL of 3M by utilizing ~66k ARB tokens in incentives.
- The detailed derivation and breakdown of numbers is shared in the ‘Section 3’ of the proposal under ‘Justification of grant size’.
~120K ARB to use as incentives deployed on Stella Lending pools
- Stella currently offers 3-10% APY in real yield on popular lending pairs.
- Stella is launching the LST-based PT strategies on top Pendle (live on 29th Sept), and Penpie (live on Oct 3rd). Due to this, we expect a surge in ETH pool utilization. Additionally, Stella will add support to many strategies using ETH and USDC as quote assets, thus increasing the utilization of the ETH and USDC pools.
- Stella needs an additional ~2-5% in lending APY on these assets to be more competitive and help bootstrap initial liquidity. Once the liquidity is there on the lending side, leveragoors will be able to open more positions, which will translate into higher (and sustainable) organic APY for lenders. This will offset the need for more lending incentives in the future.
- Based on historical data, a TVL of $5M is needed on the lending side to support $3M of leveragoor TVL.
- To achieve the additional 5% APY, we would need to utilize ~120k ARB in incentives over the period of 14 weeks.
- The detailed derivation and breakdown of numbers is shared in the ‘Section 3’ of the proposal under ‘justification of grant size’
Any remaining funds by 31st Jan 2024 will be returned back to the Arbitrum DAO.
Funding Address: 0x2e39FbB069aCcD1959D003297250129879eb20A1
Funding Address Characteristics: A 2/3 multisig with private keys securely stored.
Contract address is yet to be determined, but we will be doing Cumulative Merkle Drop Mechanism (similar to how 1inch does it : https://github.com/1inch/merkledistribution/blob/master/contracts/CumulativeMerkleDrop.sol)
SECTION 3: GRANT OBJECTIVES AND EXECUTION
[Clearly outline the primary objectives of the project and the Key Performance Indicators (KPIs) used to measure success. This helps reviewers understand what the project aims to achieve and how progress will be assessed.]
Objectives: [Clearly state the primary objectives of the grant and what you intend to achieve]
The primary objectives are :
Attract more DeFi users to Arbitrum by offering leverage on real yields :
Stella stands out as a leveraged yield protocol in the DeFi space with the unique ‘0% cost to borrow’ offering. This unique value proposition allows ~70% of the leveragoor positions on Stella to be profitable with +600% APY on average - much higher than counterparts. The levered real yields through Stella would help attract DeFi native users and sticky liquidity to Arbitrum.
Bring access to leveraged yields on various assets with unique integrations :
Stella intends to bring access to the highest yields in the ecosystem on a variety of assets by offering leverage on top of unique integrations. Stella is the only place on Arbitrum to leverage LP into Uniswap V3, TraderJoe Liquidity book or Pendle AMM. Through these multiple integrations, Stella offers yields on assets like ETH, ARB, Stables, LSDs and protocol tokens like RDNT, HMX, PENDLE, GMX etc.
Strengthen liquidity pools for innovative protocols :
Stella has listed leveraged LPing strategies for several innovative protocol token pairs like HMX/ETH, RDNT/ETH, PENDLE/ETH, GMX/ETH etc. These strategies in turn contribute to up to 10% of the underlying DEX pool TVL, helping increase the depth of the pool. Also, since leveragoors on Stella take an average leverage of 3X, leveragoors will bring in 3X the liquidity in these pools using Stella, compared to if they had directly LPed into the DEX pool. Stella is also building on top of Camelot V3 as well to support more Arbitrum native protocol token pools, and strengthen liquidity for those pools.
We believe that the above points will help enable the ultimate goal of making Arbitrum as the main L2 to access leveraged LP strategies and increase the liquidity in DEXs.
Key Performance Indicators (KPIs): [Specify the KPIs that will be used to measure success in achieving the grant objectives]
The following are the KPIs and metrics that should be achieved by the end of Jan 2024 :
- Protocol TVL - Reach $6M in TVL (235% increase from now)
- Total Positions - 4,000 leveraged positions on Stella (135% increase from now)
- New Strategy Listing - List 1 new leveraged strategy per month on the integration partner protocols towards the end of Jan 2024
- % of Strategy TVL of underlying DEX pools - Contribute 10% of the total TVL on the underlying DEX pools
- Protocol users - 300 monthly active users (MAU) on Stella
- Cumulative leveragoor real yield - $120,000 cumulative real yield earned by leveragoors on Stella (140% increase from now)
Feel free to check current statistics on Stella Analytics page: Stella
How will receiving a grant to enable you to foster growth or innovation within the Arbitrum ecosystem?: [Provide details]
There are 4 ways we see this benefiting the Arbitrum ecosystem :
Go-to yield source on Arbitrum :
Stella is providing leveraged LPing on blue chip protocols like Pendle, Uniswap V3, and TraderJoe V2. Stella will enable up to 10X leverage on LSD token-based Pendle PT pools, enabling highest yields on Arbitrum ecosystem for DeFi users. Stella’s unique ‘0% cost to borrow’ model enables ~70% leveragoors to be profitable, which is much higher than counterparts. This will in turn benefit existing users on Arbitrum, and attract DeFi degens onto Arbitrum.
Bootstrapping liquidity for innovate Arbitrum Native protocol tokens :
One of Stella’s focuses is to increase the liquidity for the Arbitrum native token pools. This is especially important to facilitate more activity to the Arbitrum native protocols. Stella currently supports up to 10% of the TVL of the underlying DEX pool for Arbitrum protocol pools like Radiant (RDNT/ETH), Pendle (PENDLE/ETH) and HMX (HMX/ETH). Stella also plans to integrate with Camelot V3 to support leveraged LPing on top of the pools of Arbitrum native protocol tokens.
Better liquidity in the DEX pools, lower price impact :
Incentives on Stella Strategy will help attract more liquidity in the Stella strategies, which in turn will increase the liquidity in the underlying DEX pools. Since leveragoors on average take a 3X leverage on Stella, they bring 3X the volumes in the underlying DEX pool, compared to if they had directly LPed into the DEX pool. The increased volume in the DEX pools enable low price impact swaps for the community. With the ARB incentives and high leverage strategies, Stella will be able to provide the highest yields for these pools.
Lending opportunities for Arbiturm Native tokens :
Stella works closely with Arbitrum partner protocols to list their tokens on the lending side, and help bootstrap liquidity. This allows the token holders to earn passive yields by lending their tokens, increases ecosystem utility of the tokens, and in turn reduces sell pressure. Some popular Arbitrum protocols with lending pools include Pendle (4.1% organic APY), Radiant (5.8% organic APY), HMX (11% organic APY), JOE (8% organic APY), GMX (4.7% organic APY) etc.
Justification for the size of the grant: [Enter explanation]
We will break down the justification into two parts : The justification on grant size and the justification on Stella being the right candidate for this grant.
- Justification of grant size :
The requested liquidity incentive is needed in this size since Stella would need to incentivize both the strategy and the lending side to get the flywheel started. Choosing to incentivize just one side would inhibit the scaling process.
To share the derivation of the exact numbers of the Stella Strategy and Stella Lend :
Stella Strategy :
Stella currently runs a similar ‘leveragoor incentive’ program by providing 20% additional yields on profitable leveragoor positions. Given the incentive program will run for 14 weeks, we expect incentives worth ~$52.8k to achieve a target TVL of 3M assuming the ‘incentive supplied to TVL achieved’ ratio will remain the same. At $0.8 per ARB token, this translates to ~66k ARB.
Stella Lend :
Stella needs to reach a target TVL of $5M on the lending side to support $3M in leveragoor TVL. A 5% APY on a TVL of $5M over a duration of 14 weeks translates to roughly $96.4k in incentives. At $0.8 per ARB, this translates to ~120k ARB.
- Justification on Stella being the right candidate for this grant :
- Stella is the most capital efficient yield source on Arbtrum offering the highest leverage. Stella offers unique integrations to CLAMMs and Pendle AMM and Arbitrum Native token pairs.
- Stella is an Arbitrum native yield protocol. We have invested in providing the most secure and sustainable source of yields for the Arbitrum community, including getting multiple audits from the likes of Peckshield, Trust etc.
Execution Strategy: [Describe the plan for executing including resources, products, use of funds, and risk management. This includes allocations for specific pools, eligible assets, products, etc.]
The execution strategy can be divided into the following :
KPI Tracker : Set up the data dashboard for the community to continuously keep track of the efficacy of the incentives deployed. Efforts to build out this tracker will be kickstarted as soon as the grant is approved, and will be live by mid November (in time for the first bi-weekly update).
Risk Management : Stella only lists strategies that cross our robust risk management framework. The framework includes listing blue chip project tokens, relying on robust price feeds only (like Chainlink), listing pools with high enough TVL etc. On the Stella Lend side, we ensure liquidity and safety of pools by putting in borrow caps by evaluating on a pool by pool basis.
Community updates : The Stella team will provide bi-weekly updates of the incentive program in the forum thread, and would be responsible for answering any questions from the community.
Disbursement of funds : This section includes details on allocation of funds, pools, and mechanism of distribution.
Allocations of funds :
66k ARB will be directed towards incentivizing the Stella strategies, while 120k ARB will be directed towards incentivizing lending pools on Stella Lend. A detailed breakdown of these numbers has been shared in Section 2 above.
Disbursement mechanism :
The ARB incentives given to the leveragoors through Stella strategies will not be directly distributed, but rather will be auto-deposited in the ARB lending pool on Stella and would be with linear vesting over 30 days. This would prevent immediate dumping of ARB tokens, and will also allow leveragoors to earn additional “lending yields” for the next 30 days. On the lending side as well, this would help bootstrap liquidity in the ARB lending pool.
Allocation for pools :
On the Stella strategies side, all the profitable leveragoors get the additional 20% incentives regardless of the strategy/pool. On the lending side, the incentives will be distributed on a per dollar basis regardless of the pool. Since we expect higher TVL in the ETH and USDC pool, we expect a higher % of the incentives going towards those assets.
Grant Timeline: [Describe the timeline for the grant]
- Application/Review/Voting: October 11, 2023
- Grant Administration / KYC Period: Late October 2023
- Distribution contract finalization and Deployment Period: Late October 2023
- Incentive Program Begins (with biweekly updates): November 1, 2023
- Incentive Program Ends: January 31, 2024
- Final Report: February 15, 2024
Do you accept the funding of your grant streamed linearly for the duration of your grant proposal, and that the multisig holds the power to halt your stream? [Yes/No] : Yes
SECTION 4: PROTOCOL DETAILS
Provide details about the Arbitrum protocol requirements relevant to the grant. This information ensures that the applicant is aligned with the technical specifications and commitments of the grant.
Is the Protocol Native to Arbitrum?: Yes. Stella is an Arbitrum native DeFi protocol, launching first on Arbitrum and has been live for 14 weeks. However, Stella plans to launch on other chains in the future.
On what other networks is the protocol deployed?: Just Arbitrum at the moment.
What date did you deploy on Arbitrum?: 22nd June 2023
Protocol Performance: [Detail the past performance of the protocol and relevance, including any key metrics or achievements, dashboards, etc.]
Here are the key metrics of the protocol in the past 14 weeks since launch :
- Peak TVL : $1.98M
- Total Leveragoor yield (real yield) : $46,767
- Total lender yield (real yield) : $8,954
- Total positions : 1700+
- Leveragoor performance : ~70% of Leverage Positions have generated positive yield at +600% APR on average
- Total value of positions opened on Stella till date : $10.2M
All the analytics of Stella is outlined here :[ Stella ]
Key achievements include :
- The only protocol on Arbitrum to enable leveraged strategies on top of Uniswap V3, TraderJoe liquidity book, Pendle AMM and Penpie.
- The only protocol on Arbitrum to allow leveragoors to borrow at 0% cost, and rather share a portion of their profitable positions with lenders.
- Highest % of profitable leveragoors amongst all leveraged strategy protocols. ~70% of leverage positions have generated positive yield at +600% APR on average - which is much higher than counterparts.
Protocol Roadmap: [Describe relevant roadmap details for your protocol or relevant products to your grant application.]
Current status of Stella :
- Stella is the only protocol currently supporting leveraged LPing on top of CLAMMs like Uniswap V3 and TraderJoe liquidity book - enabling a new level of capital efficiency.
- Stella uses the novel 0% cost to borrow’ offering’ which is unique across the Arbitrum ecosystem. This novel offering has enabled ~70% of leveraged positions to generate positive yield at +600% APR on average, which is much higher than counterparts.
In the roadmap :
- Stella is also supporting leveraged LPing on LSD (stETH, rETH) based PT pools on the Pendle AMM (starting 28th Sept).
- Stella will also provide leverage LPing on LSD (stETH, rETH) based PT pools on top of Penpie. (Oct 1st week)
- Integrate with Camelot V3 DEX to support leveraged LPing on top of the pools of Arbitrum based protocol tokens. (Oct + November)
- Integrate with novel yield sources on Arbitrum to add the layer of leverage and make Arbitrum the chain with the highest yields. The yield sources being evaluated include GLP, HLP, GM tokens (GMX V2), and other LPDfi yield sources. (December + January)
Audit History: [Provide historic audits and audit results]
Peckshield (03/06/2023) (https://github.com/stellaxyz/audits/blob/main/reports/20230603_PeckShield.pdf)
Trust Security (29/052023) (https://github.com/stellaxyz/audits/blob/main/reports/20230529_Trust_Security.pdf)
SECTION 5: Data and Reporting
Is your team prepared to create Dune Dashboards for your incentive program?:
Yes, our team is prepared to create a Dune Dashboard for the incentive program.
Does your team agree to provide bi-weekly program updates on the Arbitrum Forum thread? [Please describe your strategy and capabilities for data/reporting]
Does your team acknowledge that failure to comply with any of the above requests can result in the halting of the program’s funding stream?: [Y/N]